FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996 Commission file number 2-99779
National Consumer Cooperative Bank
(Exact name of registrant as specified in its charter)
United States of America 52-1157795
(12 U.S.C. Section 3001 et seq.) (I.R.S. Employer
(State or other jurisdiction of Identification No.)
incorporation or organization)
1401 Eye Street, NW, Suite 700, Washington, D.C. 20005
(Address of principal executive offices)
Registrant's telephone number, including area code (202)336-7700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No________.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding at March 31, 1996
Class C 217,312
(Common stock, $100.00 par value)
Class B 723,467
(Common stock, $100.00 par value)
Class D 3
(Common stock, $100.00 par value)<PAGE>
National Consumer Cooperative Bank
(doing business as National Cooperative Bank)
and Subsidiaries
INDEX
PART I FINANCIAL INFORMATION Page No.
Item 1 Condensed consolidated statements of financial
condition - March 31, 1996 and December 31,
1995......................................... 3
Condensed consolidated statements of income -
for the three months ended March 31, 1996 and
1995......................................... 4
Condensed consolidated statements of cash
flows - for the three months ended March 31,
1996 and 1995.............................. 5
Condensed notes to the consolidated financial
statements - March 31, 1996................. 6-8
Item 2 Management's discussion and analysis of
financial condition and results of operations - for the
three months ended March 31, 1996 and 1995....... 9-16
PART II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders 17
Item 6 Exhibits:
Exhibit 27 - Financial Data Schedule
NATIONAL COOPERATIVE BANK
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and December 31, 1995
(Unaudited)
1996 1995
Assets
Cash and cash equivalents $ 15,006,636 $ 21,289,376
Restricted cash 8,348,703 8,348,703
Investment securities
Available-for-sale 28,631,622 29,095,559
Held-to-maturity 8,199,956 3,118,956
Loans and lease financing 539,338,802 558,582,284
Loans held for sale 107,673,553 8,608,195
Less: Allowance for loan losses (14,869,055) (14,554,240)
632,143,300 582,636,239
Excess servicing 4,293,519 25,670,305
Premises and equipment, net 2,222,433 1,896,779
Other assets 15,646,560 12,475,747
Total assets $734,492,729 $684,531,664
Liabilities and Members' Equity
Liabilities
Deposits $ 80,892,055 $ 78,100,173
Patronage dividends payable in cash 5,866,652 5,088,851
Other liabilities 15,583,456 12,687,840
Borrowing
Short-term 143,000,000 132,499,998
Long-term 187,142,706 154,688,045
330,142,706 287,188,043
Subordinated Class A notes 182,989,022 183,013,689
Total borrowing 513,131,728 470,201,732
Total liabilities 615,473,891 566,078,596
Members' equity
Common stock
Class B 72,346,754 72,349,754
Class C 21,731,166 21,731,166
Class D 300 300
Retained earnings
Allocated 7,202,639 6,219,707
Unallocated 17,898,103 17,898,103
Unrealized gain (loss) on
investment securities
available for sale (160,124) 254,038
Total members' equity 119,018,838 118,453,068
Total liabilities and members'
equity $734,492,729 $684,531,664<PAGE>
NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the three months ended March 31, 1996 1995
Interest Income
Loans and lease financing $13,329,141 $10,883,467
Investment securities 958,848 884,731
Total interest income 14,287,989 11,768,198
Interest expense
Deposits 1,034,879 714,463
Short-term borrowing 1,853,834 1,048,557
Long-term debt, other borrowing
and subordinated Class A note 5,565,676 4,926,941
Total interest expense 8,454,389 6,689,961
Net interest income 5,833,600 5,078,237
Provision for loan losses 320,000 219,200
Net interest income after
provision for loan losses 5,513,600 4,859,037
Non-interest income
Gain on sale of loans 148,761 1,412,594
Loan and deposit servicing fees 488,395 371,181
Other 903,393 819,766
Total non-interest income 1,540,549 2,603,541
Non-interest expenses
Compensation and employee benefits 2,665,204 2,368,385
Contractual services 1,088,381 1,061,319
Occupancy and equipment 544,852 714,393
Contribution to NCB Development Corp 125,000 125,000
Other 640,640 615,545
Total non-interest expenses 5,064,077 4,884,642
Income before income taxes 1,990,072 2,577,936
Provision for income taxes 229,337 125,064
Net income $ 1,760,735 $ 2,452,872
Distribution of net income
Patronage dividends $ 1,760,735 $ 2,249,849
Retained earnings 203,023
$ 1,760,735 $ 2,452,872
NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months ended March 31, 1996 1995
Cash flows from operating activities
Net income $ 1,760,735 $ 2,452,872
Adjustment to reconcile net income
to net cash (used in) provided
by operating activities
Provision for loan losses 320,000 219,200
Depreciation and amortization 1,560,954 1,102,482
Gain on sale of assets (148,761) (1,399,815)
Loans originated for sale (75,013,963) (35,989,359)
Proceeds from sale of loans held for sale 459,833 58,278,524
Increase in other assets (3,199,371) (3,257,023)
Increase in other liabilities 2,895,615 3,325,884
Other 144,635 (867,128)
Net cash (used in) provided by
operating activities (71,220,323) 23,865,637
Cash flows from investing activities
Purchases of investment securities
Available-for-sale (3,143,917) (2,596,115)
Held-to-maturity (5,180,000)
Proceeds from maturities and sale of investment securities
Available-for-sale 3,135,515 3,301,907
Held-to-maturity 99,000 225,771
Loans originated, net of loan repayments (13,656,809) (52,876,929)
Proceeds from sale of portfolio loans 11,075,444 26,711,435
Purchases of premises and equipment (469,485) (48,102)
Net cash provided by (used in) investing
activities 19,173,366 (25,282,033)
Cash flows from financing activities
Net increase in deposits 2,791,882 11,262,027
Net increase (decrease) in short-term
borrowings 10,500,002 (24,298,690)
Proceeds from issuance of long-term debt 32,500,000 19,936,094
Repayment on long-term debt (24,667)
Repayment on other borrowings (201,800)
Redemption of common stock (3,000) (22,855)
Net cash provided by financing activities 45,764,217 6,674,776
(Decrease) increase in cash and cash equivalents (6,282,740) 5,258,380
Cash and cash equivalents, beginning of year 21,289,376 12,546,834
Cash and cash equivalents, end of period $15,006,636 $17,805,214
Supplemental schedule of noncash investing and financing activities:
Unrealized (loss) gain on investment
held for sale $ (414,162) $ 621,710
Interest paid 4,993,135 1,522,384
Income taxes paid 102,113 123,597<PAGE>
NATIONAL COOPERATIVE BANK
CONSOLIDATED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 1996
(Unaudited)
The accompanying financial statements have been prepared without audit
and reflect all adjustments (consisting only of normal recurring adjustments)
which were, in the opinion of NCB, necessary to a fair statement of the
results of the interim period presented. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
Accordingly, these condensed financial statements should be read in
conjunction with the financial statements and the notes thereto included in
NCB's most current annual report.
1. Cash, Cash Equivalents and Investment Securities
As of March 31, 1996, NCB's portfolio of investment securities, cash and
cash equivalents had an average adjusted maturity of 1168 days with interest
rates in those portfolios varying from 4.25% to 8.5%.
Cash and Investment Investments
Cash Available Held to
Equivalents for Sale Maturity
Cash $ 3,908,439 $ $
Federal funds 1,790,001
Money market securities 7,519,068
Mutual funds 1,914,060
Certificates of deposit 5,479,000
Mortgage-backed securities 2,720,956
Corporate bonds 16,027,656
Eurodollar certificates
and repurchase agreements 1,789,128
U.S. Treasury and
Agency obligations 10,689,906
$15,006,636 $ 28,631,622 $ 8,199,956<PAGE>
At March 31, 1996, the investments in the available-for-sale portfolio
were recorded at aggregate fair value. Restricted cash of $8,348,703 is held
by a trustee for the benefit of certificate holders in the event of loss on
certain loans sold of $37,300,000 and $92,623,000 in 1993 and 1992,
respectively. The restricted cash will become available to NCB I, Inc., as
the principal balance of the respective loans decreases. The loans sold
have original maturities of ten to fifteen years.
2. Loans and Lease Financing
Loans and leases outstanding by category at March 31, 1996 were:
Commercial loans $309,310,864
Lease financing 13,143,785
Real estate loans
Residential 315,114,039
Construction 469,355
Commercial 8,974,311
$647,012,354
At March 31, 1996 and December 31, 1995 real estate loans held for
resale were $107.7 million and $38.6 million, respectively.
3. Impaired Assets
Loans that became impaired after J anuary 1, 1995 totaled $2,467,374
and $2,437,450 at March 31, 1996 and 1995, respectively. The 1996 impaired
loans are comprised of nonaccrual loans and a restructured loan totaling
$1,762,057 and $705,317, respectively. The 1995 impaired loans are comprised
of nonaccrual loans and a restructured loan totaling $1,719,000 and $718,450
respectively. A specific allowance of $247,000 and $144,000 has been set
aside for these loans at March 31, 1996 and 1995, respectively, as
management's best estimate of their fair value is less than the recorded
investment in the loans. During 1996 and 1995, the interest collected on the
nonaccrual loans was applied to reduce the outstanding principal. Interest
earned on the restructured loan totaled $13,363 and $12,542 during the first
three months ended March 31, 1996 and 1995, respectively.
At March 31, 1996 there were no commitments to lend additional funds to
borrowers whose loans are non-performing.
At March 31, 1996 and 1995, NCB had real estate acquired through
foreclosure of $1,621,389 and $300,000, respectively, which are classified
as other assets.<PAGE>
4. Allowance for Loan Losses
The following is a summary of the activity in the allowance for loan
losses during the three months ended March 31, 1996:
Balance at January 1, 1996 $14,554,240
Provision for loan losses 320,000
Charge-offs (10,800)
Recoveries of loans previously charged off 5,615
Balance at March 31, 1996 $14,869,055
The allowance for loan losses as a percentage of average loans and
lease financing at March 31, 1996 was 2.4%.
5. Mortgage Servicing Rights
As of January 1, 1996, NCB adopted Statement of Financial Accounting
Standards No. 122, "Accounting for Mortgage Servicing Rights". The impact of
the implementation on its financial condition and results of operation was
immaterial.<PAGE>
NATIONAL COOPERATIVE BANK
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
SUMMARY
NCB's net income for the three months ended March 31, 1996 was $1.8
million. This was a 28.2% or $.7 million decrease compared with the three
months ended March 31, 1995. The variance primarily resulted from a
reduction in non-interest income of $1.1 million and increases in
non-interest expense and provision for loan losses totaling $.3 million.
These were, however, partially offset by an increase in net interest margin
of $.8 million.
Total assets were $734.5 million at March 31, 1996, up 7.3% from
$684.5 million at December 31, 1995. The primary increase in assets was the
$49.8 million of growth in loans held for sale. These loans were subsequently
sold in April.
NET INTEREST INCOME
Net interest income increased $755 thousand for the first three months
of 1996 compared with the same period a year ago. As shown on Table 2, the
increase in net interest income related to increased volume was $720 thousand
while the increase related to changes in interest rates was $35 thousand.
For the three months ending March 31,1996, interest income increased
$2.5 million to $14.3 million from $11.8 million in the three months ended
March 31,1995. The increase in interest income was due to a higher average
loan balance for the time period in a declining rate environment. As shown
on Table 2, interest income increased $2.9 million due to increased volume
but decreased $.4 million due to interest rates. As shown on Table 1, the
average rate on interest earning assets decreased to 8.42% during the three
months ended March 31,1996 compared with 8.59% in the same time period in
1995.
Interest expense increased $1.8 million to $8.5 million for the three
months ended March 31, 1996 compared with $6.7 million for the three months
ended March 31, 1995. The average rate on interest-bearing liabilities
decreased to 5.96% compared with 6.45% in the same period in 1995.
Borrowings at March 31,1996 increased 15% or $45 million from the December
31, 1995 balance of $287.2 million and were used to fund loan originations.
As shown on Table 2, a $2.2 million increase in interest expense was volume
related while a $.5 million decrease was due to interest rates.<PAGE>
NON-INTEREST INCOME
Non-interest income for the three months ended March 31, 1996 of $1.5
million decreased 40.8% or $1.1 million from $2.6 million for the same period
last year. The decrease was due to a lower gain on sale of loans which
totaled $149 thousand in the first three months of 1996 compared with
$1.4 million in the same period in 1995. During the first quarter of 1996
and 1995, loans sold amounted to $459,833 and $58,278,524, respectively.
An increase in servicing fee income and excess servicing fees partially
offset the negative variance.
NON-INTEREST EXPENSES
Non-interest expenses for the three months ended March 31, 1996
increased 4% to $5.1 million from $4.9 million for the three months ended
March 31, 1995. Salaries and benefits, the largest component of non-interest
expenses, increased 12.5% or $.3 million due to a higher employee base at the
start of 1996 as compared with 1995. Partially offsetting this increase was a
positive adjustment to the headquarters rent related to 1995.<PAGE>
Table 1
Rate Related Assets and Liabilities
(dollars in thousands)
Three Months Ended March 31,
ASSETS 1996 1995
Average Income/ Yields/ Average Income/ Yields/
Balance Expense Rates Balance Expense Rates
Interest earning assets
Real estate loans $ 293,905 $ 6,393 8.70% $ 234,413 $ 5,176 8.83%
Commercial loans
and leases 323,025 6,936 8.59% 258,058 5,707 8.85%
Total loans and leases 616,930 13,329 8.64% 492,471 10,883 8.84%
Trading, investment sec.,
cash equivalents and other
earning assets 61,913 959 6.19% 55,435 885 6.38%
Total interest earning
assets 678,843 14,288 8.42% 547,906 11,768 8.59%
Allowance for loan losses (14,709) (12,967)
Non interest earning assets
Cash 4,266 4,982
Other assets 38,361 20,144
Total non interest earning
assets 42,627 25,126
Total assets $ 706,761 $560,065
LIABILITIES AND MEMBERS' EQUITY
Interest bearing liabilities
Subordinated Class A
notes $ 183,001 $ 2,415 5.28% $182,542 2,795 6.12%
Notes payable 303,267 5,004 6.60% 167,915 3,169 7.66%
Deposits 80,923 1,035 5.12% 64,145 726 4.53%
Total interest bearing
liabilities 567,191 8,454 5.96% 414,602 6,690 6.45%
Other liabilities 20,804 31,014
Members' equity 118,766 114,449
Total liabilities and
members' equity $ 706,761 $ 560,065
Net interest earning
assets $ 111,652 $ 133,304
Net interest revenues
and spread $ 5,834 2.46% $ 5,078 2.14%
Net yield on
interest earning assets 3.44% 3.71%<PAGE>
Table 2
Change in Net Interest Income
(dollars in thousands)
For the three months ended March 31,
1996 Compared 1995
Increase (decrease) due to changes in:
Average Average
Volume* Yield Net**
Interest Income
Cash equivalents and
investment securities $ 222 $ (148) $ 74
Commercial loans and leases 1,444 (206) 1,238
Real estate loans 1,296 (87) 1,209
Total interest income 2,962 (441) 2,521
Interest Expense
Deposits 205 116 321
Notes payable 2,036 (267) 1,769
Subordinated Class A notes 1 (325) (324)
Total interest expense 2,242 (476) 1,766
Net Interest Income $ 720 $ 35 $ 755
* Average monthly balances
** Changes in interest income and interest expense due to changes in rate
and volume have been allocated to "change in average volume" and
"change in average rate" in proportion to the absolute dollar amounts
in each.<PAGE>
PROVISION FOR INCOME TAXES
The federal income tax provision is determined on the basis of
non-member income generated by NCB Savings Bank, FSB and reserves set aside for
the retirement of Class A notes and dividends on Class C stock. NCB's
subsidiaries are also subject to varying levels of state taxation. The
federal income tax provision for the three months ended March 31, 1996
increased by $104 thousand compared with the prior year's provision of $125
thousand.
CASH, CASH EQUIVALENTS AND INVESTMENT SECURITIES
Cash, cash equivalents and investment securities at March 31, 1996
decreased $1.7 million or 2.7% from $61.9 million at year-end 1995. NCB used
the proceeds from the portfolio liquidation to partially fund loan
originations. As a percentage of earning assets, cash, cash equivalents and
investment securities decreased to 8.5% at March 31, 1996 from 9.4% at
December 31, 1995.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses at March 31, 1996 increased 2.1% to $14.9
million from $14.6 million at December 31, 1995. The allowance during the
period was impacted by loans charged off, net of recoveries of loans
previously charged off, amounting to $5 thousand and the provision of $320
thousand. NCB's provision for loan losses as a percentage of average loans
and leases outstanding remained flat at .2%.
The loan loss allowance as a percentage of average loans and leases
decreased from 2.5% at December 31, 1995 to 2.4% at March 31, 1996. The
decrease is primarily due to the increased level of loans outstanding during
the period.
As shown in Table 3, total nonperforming assets (renegotiated and
non-accruing loans and real estate owned) increased from $7.2 million at
December 31, 1995 to $7.5 million at March 31, 1996. Nonperforming assets
as a percentage of loans and leases outstanding plus real estate owned were
1.1% at March 31, 1996 compared with 1.2% at year-end 1995. The allowance
for loan losses as a percentage of nonperforming assets decreased to 198.1%
at March 31, 1996 from 202.7% at December 31, 1995.<PAGE>
TABLE 3
Nonperforming assets
(dollars in thousands)
March 31, Dec. 31, Sept. 31, June 30, March 31,
1996 1995 1995 1995 1994
Real estate owned $ 1,621 $ 1,397 $ 1,314 $ 300 $ 300
Non-accruing $ 1,762 $ 1,741 $ 932 $1,919 $ 1,719
Restructured $ 4,124 $ 4,041 $ 3,960 $2,080 $ 2,117<PAGE>
INTEREST
BEARING LIABILITIES
Interest Bearing liabilities
(dollars in thousands)
3/31/96 12/31/95 % Change
Deposits $ 80,892 $ 78,100 3.6%
Lines of credit 143,000 132,500 7.9%
Term debt 187,143 154,688 21.0%
Class A notes 182,989 183,014 0.0%
Total $594,024 $548,302 8.3%
Interest-bearing liabilities increased $45.7 million to $594.0 million
at March 31,1996 from $548.3 million at December 31, 1995.
For the first three months of 1996, deposits at NCB Saving Bank, FSB
grew 3.6% to $80.9 million. Average maturity of these deposits is 22.1
months. Funds generated by the increased deposit activity were used to
originate single-family loans and increase liquidity.
At March 31,1996, short term borrowings and intermediate-term notes
increased 7.9% and 21.0%, respectively, from year-end 1995 as proceeds were
used to fund loan disbursements during the first quarter in 1996. Included
in these borrowings are NCB's short-term borrowings from its cooperative
customers which have an outstanding balance of $9.0 million at March 31,
1996.<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL CONSUMER COOPERATIVE BANK
Date:
By: /s/ Richard L. Reed
Richard L. Reed,
Managing Director,
Chief Financial Officer
By: s/ Marietta J. Orcino
Marietta J. Orcino
Vice President,
Tax & Regulatory Compliance
and an authorized signature<PAGE>
Item 4 Submission of Matters to a Vote of Security-Holders
NCB held its annual meeting on April 18, 1996. Shareholders elected the
following persons to serve as directors:
Leo Barlow (re-elected)
James L. Burns, Jr.
Marilyn McQuiade
Mary Ann Rotham (re-elected)
The following directors continued in office after this meeting:
Alfred A. Plamann
Joseph A. Cabral
Wally Smith
Robert L. Thompson
Pete Crear
Thomas D. Henrion
Terry Lewis
Harry J. Bowie
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,908,439
<INT-BEARING-DEPOSITS> 9,308,196
<FED-FUNDS-SOLD> 1,790,001
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 28,631,622
<INVESTMENTS-CARRYING> 8,199,956
<INVESTMENTS-MARKET> 0
<LOANS> 647,012,354
<ALLOWANCE> 14,869,055
<TOTAL-ASSETS> 734,492,729
<DEPOSITS> 80,892,055
<SHORT-TERM> 143,000,000
<LIABILITIES-OTHER> 21,450,108
<LONG-TERM> 370,131,728
<COMMON> 94,078,220
0
0
<OTHER-SE> 160,124
<TOTAL-LIABILITIES-AND-EQUITY> 734,492,729
<INTEREST-LOAN> 13,329,141
<INTEREST-INVEST> 958,848
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 14,287,989
<INTEREST-DEPOSIT> 1,034,879
<INTEREST-EXPENSE> 8,454,389
<INTEREST-INCOME-NET> 5,833,600
<LOAN-LOSSES> 320,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,064,077
<INCOME-PRETAX> 1,990,072
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,760,735
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 7.49
<LOANS-NON> 1,762,057
<LOANS-PAST> 2,750,602
<LOANS-TROUBLED> 4,124,407
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 14,554,240
<CHARGE-OFFS> 10,800
<RECOVERIES> 5,615
<ALLOWANCE-CLOSE> 14,869,055
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<ALLOWANCE-UNALLOCATED> 14,869,055
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